Elections have entered the world of the weird because America itself is on the edge of something that will shake its very core. What that event will be is hard to say because there are so many possibilities, but tensions of this caliber usually escalate to crisis before they deescalate, and tensions today are surely escalating. The elections only serve as a gauge for how close to the bottom of the abyss we actually are.
We all know why equity markets are zooming. The Bernanke put is standard operating procedure: globally. Whatever is out there’s got central bankers spooked. To use the cliche, they’ve decided we can’t handle the truth. But it’s impossible to fight a manticore you can’t see.
In an oddly-timed-release, just a day after her 'unusual' meeting with President Obama (and sandwiched between two "emergency Fed meetings"), Janet Yellen's seemingly legacy-protecting narrative-confirming interview with TIME magazine proclaiming once again that "we are focused on Main Street, on supporting economic conditions - plentiful jobs and stable prices - that help all Americans." So now you know - it's all for you America - the bank bailouts, the deflationary-glut-creating ZIRP, the money-printing, and the "confusing and confounding" messaging. Now stop your complaining and Vote Hillary!
In another quiet overnight session, the biggest - and unexpected - macro news was the surprise monetary easing by Singapore which as previously reported moved to a 2008 crisis policy response when it adopted a "zero currency appreciation" stance as a result of its trade-based economy grinding to a halt. As Richard Breslow accurately put it, "If you need yet another stark example of the fantasy storytelling we amuse ourselves with, juxtapose today’s Monetary Authority of Singapore policy statement with the storyline that the Asian stock market rally intensified on renewed optimism over the global economy. Singapore is a proxy for trade and economic growth ground to a halt last quarter." The Singapore announcement led to a sharp round of regional currency weakness just as the dollar appears to have bottomed and is rapidly rising.
Markets have stopped focusing on what central banks are doing and are "positioning for what they believe central banks may or may not do," according to BofA's Athanasios Vamvakidis as he tells FX traders to "prepare to fight the central banks," as the market reaction to central bank policies this year reflects transition to a new regime, in which investors start speculating which central bank will have to give up easing policies first.
In Greek mythology there was a monster called Cerberus, the hound of Hades, a monstrous multi-headed dog who guarded the gates of the underworld, preventing the dead from leaving. Today central banks have taken on the role of feeding our own modern version of Cerberus to keep all the troubles away. This hound of Hades has 3 heads that are named debt, deflation and demographics. Together they make a deadly combination that will result in a massive reset of asset prices...and central bankers are running out of food to feed the monster.
The stock market is still viewed as if it were a discounting mechanism, a system where information is processed and priced to deliver insight about the fundamental state of liquidity, markets, and the economy. That view has always been debatable, but never more so than the whole of this century so far. What were share prices suggesting, fundamentally, in March 2000? Or October 2007?
- China trade surprise gives stocks a lift (Reuters)
- JPMorgan profit hurt by drop in investment banking revenue (Reuters)
- About 40,000 Verizon workers launch strike (Reuters)
- Regulators Set to Reject Some Big Banks’ ‘Living Wills’ (WSJ)
- More Startups Are Getting Lower Valuations Than Joining the Billion-Dollar Club (BBG)
- Closures and court cases leave Turkey's media increasingly muzzled (Reuters)
Longer term the inflation adjusted 1980 high of $150/oz remains realistic – especially given the increasing use of silver in various industrial application and silver’s increasing investment demand – with silver continuing to be seen as the cheaper, better value, alternative to gold.
Bernanke's Former Advisor: "People Would Be Stunned To Know The Extent To Which The Fed Is Privately Owned"Submitted by Tyler Durden on 04/12/2016 18:23 -0400
Earlier today, former central bank staffer and Dartmouth College economics professor Andrew Levin, special adviser to then Fed Chairman Ben Bernanke between 2010 to 2012, said something shocking. "A lot of people would be stunned to know” the extent to which the Federal Reserve is privately owned." Is the truth finally starting to come out?
For those of us who recall how the mainstream media, compromised pundits and Wall Street welfare babies “sold” us on the unconscionable banker bailouts, we vividly remember a constant repetition of the invented and preposterous mantra that “helping Wall Street in turn helps Main Street.” This fantastical idea that the fortunes of Wall Street and Main Street are inextricably linked is, of course, total garbage and always has been.
Moments ago the IMF did what it does better than anyone (with the exception of the Fed): it once again admitted its forecast of world growth had been too optimistic, and as a result in its just released quarterly World Economic Outlook report, it cut its forecast for 2016 global GDP growth from 3.4% to 3.2%, and from 3.6% to 3.5% for 2017. Indicatively, back in July 2014 the IMF was forecasting 4.0% GDP growth in 2016. It is now 20% lower.
Nomura Fires 1,000 As It Quits European Equity Business; Blames "Extreme Volatility And Lack Of Liquidity"Submitted by Tyler Durden on 04/12/2016 08:21 -0400
The latest confirmation of the pain global megabanks are suffering as a result of an abysmal trading environment, in no small part made even worse due to constant central bank tinkering, comes from Japan's largest brokerage, Nomura, which eight years after buying Lehman's European and Asian units has decided to fire 15% of its European staff and is abandoning most of its European equities business. Altogether, Nomura will fire about 1,000 bankers between its European and US groups.
"Intervention in foreign exchange markets in order to gain a competitive advantage is unacceptable," proclaims US Treasury Secretary Jack Lew in a strongly worded statement today with regard America's position in the global economy. That we note this comment is only relevant as, despite the apparent "stability" of the Chinese Yuan against the USD, relative to the 13-currency-basket with which China primarily trades, the Yuan has collapsed to 17-month lows - with JPY and EUR appearing to bear the brunt of the pain.
The problem with forward earnings estimates is that they consistently overestimate reality by roughly 33% historically. The illusion of“permanent liquidity,” and the belief of sustained economic growth, despite slowing in China, Japan, and the Eurozone, has emboldened analysts to continue push estimates of corporate profit growth higher. Even now, as the earnings recession deepens, hopes of a sharp rebound in profitability remains ebullient despite the lack of any signs of economic re-acceleration.